Emirates has reviewed the work of a regional telephone booking centre. The centre employs 40 advisers and handles 96 000 passenger bookings each month. Mana...

(a) Economies of scale are a fall in average cost as a business increases its scale of output. [2]

(b) Two possible internal diseconomies are slower or less accurate communication and extra management layers delaying decisions. Employees may also become less motivated if they feel less valued, and coordination between departments can become difficult. Each point matters because it can reduce service efficiency and raise average costs. [4]

(c)

\[96\,000\div40=2\,400\]

The centre currently handles 2 400 bookings per adviser per month. [2]

(d) Combining centres could spread training-team costs over more bookings, lowering average cost. Buying call-handling software for a larger operation may secure a discount, allowing higher profit or lower fares. Labour productivity may also improve:

\[225\,000\div90=2\,500\text{ bookings per adviser per month}\]

This exceeds the present 2 400 bookings per adviser.

However, advisers already need approval from three managers for complex itinerary changes. This suggests communication and decision-making problems already exist. A larger centre could make these delays worse, damaging customer service.

Emirates should combine the centres only if it simplifies approvals and monitors response times and service quality. Cost savings do not justify unreliable customer service. [8]